Definition
Convertible bonds are a type of bond that can be converted into shares of the company at a later date. They offer regular interest like normal bonds, with the option to become a shareholder.
Example
You buy a convertible bond worth Rs 10,000. After a certain period, you may choose to convert it into company shares instead of taking back the money. If the share price has increased, this can be beneficial.
Caution
Convertible bonds may offer lower interest compared to regular bonds because of the conversion option. Also, if the company’s share price does not rise, the conversion may not be useful.